David R. Henderson  

Bio of Elinor Ostrom

Shun the paper, not the person... Don't apply AD to long run gro...
Most economists are familiar with the late Garrett Hardin's classic article, "The Tragedy of the Commons" (see Tragedy of the Commons). Hardin's idea was that when no one owns a resource, it is overused because no one can control its usage and each person has an incentive to use it before others do. This insight has helped us understand much human behavior and has led people to advocate either having the resource privately owned or having it controlled by government.

Ostrom's work suggested, contrary to conventional thinking, that communities are able to self-organize in ways that punish those who free ride on the common resource. Examining dozens of real-world arrangements, she found instances of communal ownership that worked--that is, that did not lead to the tragic outcomes envisioned by Hardin--as well as ones that did not. Were there systematic differences? Yes, and interestingly, the ones that worked did have a kind of property rights system, just not private ownership. Based on her work, Ostrom proposed several guidelines, which the Nobel committee highlighted, for managing common-pool resources. Among them are that rules should clearly define who gets what, good conflict resolution methods should be in place, people's duty to maintain the resource should be proportional to their benefits, monitoring and punishing is done by the users or someone accountable to the users, and users are allowed to participate in setting and modifying the rules. Notice the absence of top-down government solutions.

This is from the bio of Elinor Ostrom, which has recently been posted on Econlib. As I mentioned earlier, I am writing bios of economists who have won the Nobel Prize since 2004. There are more to come.

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COMMENTS (10 to date)
Brian writes:

While Ostrom's work is interesting and important, it should be noted that deviations from the Tragedy of the Commons are the rule, not the exception. Harding was completely off base that the commons usually leads to tragedy. In fact, this only happens when the payoff for defecting (gaining a personal advantage from the commons at a cost to others) is very large. Harding was obsessed, of course, with the notion of overpopulation, but human history already made clear that people don't behave that way. For example, with the demographic transition experienced by every maturing free-market economy, birth rates fall and give rise to modest population growth, even without modern birth control measures. The reason is that the personal net benefit of having children, while positive, is not large enough to induce the tragedy. Harding was mostly wrong, even if many people don't yet understand that.

david writes:

Ostromian systems don't fail gracefully under unforeseen macroscopic shocks - environmental/pollution shocks, technological change, financial leveraging/deleveraging, etc. Simple problems like "it's suddenly become a lot more attractive for our children to go to college and move away to highly-skilled careers, rather than maintain our small-scale agricultural lifestyle - so we should sell, but nobody knows who has the residual claim" can be immensely destructive

The tradable bundle of rights that makes up a "property right" is uniquely adaptable and uniquely enforceable by top-down bureaucracies of tort courts and states.

Tim Worstall writes:

"While Ostrom's work is interesting and important, it should be noted that deviations from the Tragedy of the Commons are the rule, not the exception."

But that was Ostrom's "Aha!" moment.

Hardin predicts that open access commons must become regulated as demand increases or they disappear. And either private property or govt regs are the methods of regulation.

Ostrom looked around he world and saw that this was not so. The Aha! moment: so, why?

That she then worked out why is great.

This is actually a great example of the scientific method in economics. Theory predicts that such does not happen. Such does happen. Great, so we need a new theory, don't we?

David R. Henderson writes:

Hardin was mostly wrong about population. Which is why, when I commissioned his piece for the Fortune Encyclopedia of Economics (later the Concise Encyclopedia of Economics), I told him I didn’t agree with the population point and didn’t want that in there. He agreed not to put it in. That’s one main reason I like the piece in the Encyclopedia better than the one in Science.
But he was right about much of the other aspects of the Tragedy of the Commons. Notice how relatively strong are the Ostrom criteria for there not to be a tragedy.

A tangent about sentence structure
I struggle to parse the meaning of this sentence fragment:

... she found instances of communal ownership that worked--that is, that did not lead to the tragic outcomes envisioned by Hardin--as well as ones that did not.
I'm guessing my difficulty comes from identifying the antecedent of the pronoun "ones". At first I took "ones" to refer back to
instances of communal ownership that worked.
But now I believe you intend to refer back to simply
instances of communal ownership.
So with that reading it makes sense.

Oops. I think I'm still not awake.

ThomasH writes:

I realize that is not the point of this post, but I still wonder how and whether Henderson thinks Ostrum's insights are relevant to more conventional problems of incomplete markets like air and water pollution and specifically CO2 accumulation in the atmosphere.

[Clarification which may be unneeded: This comment in no way is intended to disparage Ostrum's work including the implication that the simplistic, "just privatize it" responses to a large class of issues is mistaken.]

James Hanley writes:

Happy to see you post a biography of Lin Ostrom. As a former post-doc at her institute (the Workshop in Political Theory and Policy Analysis at IU), I just want to add that Ostrom was an exceptionally generous and kind person, as well as an outstanding scholar.

Brian writes:

"But he was right about much of the other aspects of the Tragedy of the Commons."


I'm inclined to think not. The tragedy can occur, of course, but it's not the norm. Population is not just one odd exception.

Let's think of another clear example of a commons, such as the environment. Air and water don't keep getting more polluted, even without government intervention. In industrialized countries, people work to improve those public assets because they prefer clean air and water.

Here's the problem with Hardin's argument. Logically it's based on a finite repeated prisoner's dilemma, where players defect for personal advantage at a cost to the other players. Game theory says that rational players will race to the bottom, with everyone doing poorly. That's the tragedy. But humans rarely behave that way, regardless of what game theory says. Specifically, the argument that players will race to the bottom for ANY net positive defection payoff is wrong. This only happens when the net payoff relative to defection cost is very large. Otherwise, only small to moderate amounts of defection occur, preventing the tragedy.

Now, if you still think I'm wrong, can you give me obvious and widespread examples of the tragedy at work?

Phil writes:

Parking lots are a great example of the tragedy being uncommon. At places like shopping malls where there is no police enforcement of parking activity, you still see very few people straddle the lines taking two spaces. Taking two has no cost to the driver (other than a dirty look by passers-by), but provides benefits: easier entry and exit and it minimizes the likelihood of door dings. When drivers do take two spaces, they typically park in the more remote sections of the parking lot. Ostrom would cite the strength of informal rules (manners, courtesy) for this voluntary compliance that defies the Tragedy of the Commons.

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